Warrant Watch on SingTel

Nov 7, 2007

WARRANT WATCH on SingTel


THE release of SingTel's second-quarter results today is likely to generate a flurry of interest in the stock. Traders looking for an affordable way to get exposure to the telco could turn to covered warrants issued on SingTel by foreign banks.

One strategy is to look at covered warrants with a strike price close to SingTel's market price but with a few months left to expiry. The price of such instruments will closely track SingTel's price movements.

Traders who are bullish on SingTel could look at a call issued by Deutsche Bank. With this instrument, an investor will need to use two warrants and pay the strike price of $3.88 to get one SingTel share. It expires in April.

SingTel shares rose six cents to $3.92 yesterday.

Citigroup analysts Anand Ramachandran and Tim Smeallie expect SingTel's second-quarter recurring profits to rise 7.3 per cent to $945 million. SingTel is also likely to get a 30 per cent jump in contributions from associates to $665 million.

The two analysts also anticipate that SingTel will pay an interim dividend of five cents a share. The only significant risk is the possibility of a further sale of SingTel shares by major shareholder Temasek Holdings, which last placed out shares in the telco at $2.66 in March. This could flood the market with the stock.